Bloomberg News

Lockheed F-35 May Face Cuts in Budget Review, Gates Says

June 29, 2011

(Updates with additional Gates quotes and context after 10th paragraph.)

June 29 (Bloomberg) -- Lockheed Martin Corp.’s F-35 fighter program might be cut back as part of the Pentagon’s new budget review, even as there is a strong need for the program, departing U.S. Defense Secretary Robert Gates said today.

“The issue will be less ‘whether’ we go forward with the plane than how many we ultimately buy,” Gates said during an interview with Bloomberg News on his last full day at the Pentagon.

Asked if the Pentagon’s costliest weapons program was endangered because of deficit reduction pressures, Gates said, “potentially, one of the issues could be the size of the buy.”

“Obviously, if you reduce that, the price per airplane is going to go up. People have to bear that in mind. But, there is no question in my mind we have to have the airplane if we are looking out 10, 20, 30 years,” he said.

The Pentagon currently plans to spend $382 billion to buy 2,457 of the stealth jets in different versions for the Navy, Air Force and Marine Corps.

The F-35 will be assessed as part of the Pentagon review of how to reach President Barack Obama’s goal to reduce military spending by $400 billion through 2023. Gates in the interview said the review was his idea.

“People are really going to have to stay on top of it in terms of execution,” Gates said of a program that’s had its test and production schedules extended twice since late 2009.

‘Key is Execution’

“I think we have identified the problems, identified the issues that have to be dealt with, and now, both for us and the manufacturer, the key is execution.”

Gates cited the importance of “not only keeping costs under control but seeing where we can reduce those costs.”

Gates in an August 2009 Bloomberg interview at Lockheed Martin’s plant in Forth Worth, Texas, said “a lot of the highest-risk elements of the program are behind us at this point. I think there are still management and execution issues.”

His view changed in late 2009 when given an independent “joint estimating team” assessment. That led to the first of two program delays.

He fired the military program manager in February 2010 and ordered the first delay, cutting the Pentagon’s planned purchases by 10 aircraft in fiscal 2011 and a total of 122 through 2015. He also removed $614 million in fee payments because “a number of key goals and benchmarks were not met.”

Second Engine

Gates in the interview also said he expects the Pentagon will continue to oppose development of the alternative engine for the F-35 by General Electric Co. and Rolls-Royce Group Plc.

“It’s the Air Force’s money and the Air Force doesn’t have any,” he said of the service buying most of the F-35s. The Pentagon says the second engine would cost $2.9 billion to complete development.

“I don’t know from nothing about the technologies of these engines but I do pay attention to the people who do, and for whom that engine might be built,” Gates said. “Whether it’s the Marine leadership, the Air Force leadership or the Navy leadership -- none of them are interested in the extra engine. They don’t want to pay the additional 3 billion bucks.”

“It’s not just personal with me,” Gates said. “My recommendation was based on the views of the customers and guys doing the acquisitions.”

Still, the U.S. Government Accountability Office in a September 2010 report said it may cost less than the Pentagon’s $2.9 billion estimate.

The projection “does not include the same level of fidelity and precision normally associated with a detailed, comprehensive estimate,” the GAO said.

--Editors: Terry Atlas, Steven Komarow

To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net; Viola Gienger in Washington at vgienger@bloomberg.net;

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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